HSA reversal of contributions and 2023 W-2

[bsagee]

I signed up for Social Security in mid-January 2024 and found out that by doing so I will automatically became enrolled 6 months retroactively in Medicare Part A. I contributed the maximum single contribution to my HSA in 2023 but am not enrolled in an HSA for 2024. I contacted my employer and arranged for 6 months of 2023 HSA contributions to be reversed so that I would not have excess HSA contributions when Medicare kicks in retroactively for July-December 2023. I am expecting to be mailed an HSA refund check this week. Do I need a corrected W-2 to reflect these actions? I assume that I won't need a corrected HSA form since the 1099-SA only shows gross distributions. What do I need to do differently when I compute my taxes in TurboTax? Now that the HSA funds have been reversed I would like to go ahead and file my taxes. 

[RobertB4444]

If you received a deduction for the HSA on your W2 I would request a corrected W2.  If you can't get one then you should enter the corrections yourself so that the amounts are fixed.  You're right, you don't need a corrected HSA form.

@bsagee 

[bsagee]

I appreciate your feedback. I am trying to determine on my W-2 if an HSA deduction was made. I currently already have a corrected W-2 that reflects an approximately $50 decrease in boxes 1,3,and 5 due to a payroll error. I see a figure in box 12c (W) on the original W-2 that represents the original maximum HSA contribution that I made. How do I tell if a deduction has been made and to what figures do I apply a manual correction? Thanks.

[BillM223]

The code W amount in box 12 of your W-2 is the amount of "employer" contribution, that is, the amount that your employer contributed to your HSA PLUS the amount you contributed through payroll deduction (it's the IRS' terminology).

I bring this up because the code W amount is removed from Wages in boxes 1, 3, and 5 on your W-2 before your W-2 is even printed.

This is why there is no "deduction" per se for the code W amount, because the code W amount was never in your income in the first place.

To answer one question - you can't tell from looking at the W-2 if your employer made the W-2 out correctly, that is, did your employer removed the code W amount from Wages in boxes 1, 3, and 5. You have to ask your employer.

Having said that, there is a line for HSA deduction on line 13 on Schedule 1 (1040), but only HSA contributions you made directly to the HSA custodian will appear there.

When you do your tax return, TurboTax may likely find that you made excess contributions, if the code W amount was not changed. TurboTax will automatically add the excess back to income (remember, it was taken out of income on your W-2, so the excess has to be added back). However, it is also likely that the amount you had the employer withdraw was not the same amount that TurboTax thinks was in excess. This can causes issues, like you being unable to tell TurboTax that you withdrew an excess larger than what it determined the excess to be. TurboTax won't accept your entry in this case.

Well, when you get to that point, you may have to come back and talk about it.